Public Finances in Costa Rica
The pattern of public expenditure and revenue in Costa Rica
Economy of Costa Rica
The economy of Costa Rica heavily depends on tourism, agriculture, and electronics exports. Poverty has been reduced over the past 15 years, and a social safety net put into place....

 is typical of a middle income country. According the CIA World Factbook, in 2008, central government revenue was US $4,604 million, approximately 15% of GDP. Meanwhile expenditure was $4,552 million, producing a small overall surplus of $52 million.. In subsequent years, expenditure has grown faster than income, producing deficits.


The major sources of revenue are income taxes, indirect taxes, social security contributions and customs duties. According to figures prepared by the Costa Rican government for the International Monetary Fund, the basic breakdown as a percentage of GDP is as in the table below.
Item (% GDP) 2007 2008 2009
Tax revenue 15.2 15.6 13.9
Direct taxes 4.6 5.1 4.7
Sales tax 5.9 6.0 5.0
Excise, customs, and others 4.8 4.6 4.3
Nontax revenue 0.3 0.2 0.3
Contributions to social security 6.3 6.7 7.1
Operating balance of public enterprises 1.0 0.5 0.6
Total Revenues 22.8 23.1 21.9

There is no VAT
Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...

in Costa Rica, but the there is a generally applied sales tax of 13% that, combined with excise taxes on specific consumption goods raises around half of government revenue. Income taxe rates rise with reported income, beginning at 10% for annual income over Costa Rican colón 41,112,000. As of 2010, the top rate of 30% applies to people earning in excess of Costa Rican colón 82,698,000. Nominally, employers are responsible for the bulk of social security contributions.


The largest components of expenditure are education (21.3% of government expenditure in 2007/08), social protection (21.1%) and healthcare (19%). There is no expenditure on defence. . In cash terms, expenditure has risen steeply: healthcare expenditure rose by a factor of 4.5 between 1999 and 2008, while social protection rose by a factor of 4 over the same period..

Borrowing and Debt.

According to the IMF (the source for the table below), in most years recently Costa Rica has run fiscal deficits, but in 2007 and 2008 small surpluses were reported. Combined with some growth of the economy this has produced a decline in the debt to GDP ratio. The year 2009 saw a significant decline in the state of public finances and the IMF is forecasting deficits from 2010 to 2013.
Item (% GDP) 2007 2008 2009 2010 (est.)
Overall balance (% GDP) 1.2 0.1 -4.0 -4.5
Combined Public Sector Debt (%GDP) 43.2 35.7 37.9 37.9

Externally held public sector debt fell from 7.7% of GDP in 2007 to 5.5% in 2008.

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